RIPR is a (paper) newsletter and a weekly column appearing in ten
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Aug 09 (38) - How your government's
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About

The Rhode Island Policy Reporter is an independent news source that
specializes in the technical issues of public policy that matter so
much to all our lives, but that also tend not to be reported very
well or even at all. The publication is owned and operated by Tom
Sgouros, who has written all the text you'll find on this site,
except for the articles with actual bylines.

Responsibility:

Tom Sgouros

Tue, 31 Aug 2010

We're coming down to the home stretch in the primary election season.
As you consider the options in the race for Mayor of Providence, ask
yourself not what you want the next mayor to be, but what you want the
next mayor to do. Do you want a mayor who pretends that the budget is
balanced through "tough choices", while the real condition of the city
continues to deteriorate? Do you want someone who thinks that the
only way to grow jobs is through lavish tax cuts to rich people? If so,
you're in luck; Steve Costantino is your guy. He's done all of that
-- and more.

For the past six years, Representative Steve Costantino has been the
chair of the House Finance Committee. In that role, he has impressed
many observers with his detailed knowledge of the state budget and his
mastery of government finance [0]. He's an intelligent man, and a
good negotiator. But intelligence and aptitude are only part of the
game. Judgment plays a big part, too, and here it's hard for me to be
as kind.

People who follow the state budget each year disagree about a lot of
things: some groups lobby for still more tax cuts, and others decry
the decay of the services our state is supposed to provide. But
wherever we stand on those issues, all of us agree that our state's
fiscal disaster was foreseen years ago. The Governor's budget office,
the Rhode Island Public Expenditure Council, the Poverty Institute,
and anyone else with fingers to count on could see -- and did see --
the impending fiscal disaster. In the face of these warnings of
crisis, the Governor, with the able assistance of Rep. Costantino,
simply made things worse [1]. They cut programs meant to *save* money
[2], cut taxes on rich people without any idea how to pay for the cuts
[3], and doubled the state's debt [4].

They have tried to hide the problems by selling state property [5], by
pretending that tax collections would be higher than any reasonable
estimate [6], by looting programs that actually support themselves
[7], and with all kinds of one-time money [8]. But arithmetic will
out; you can hide the results from the public, but eventually there
must be money to keep the checks from bouncing. Where did it come
from?

Mostly it came from your city or town. The state's contribution to
the cost of education has gone from $647 million in the 2005 fiscal
year (Costantino's first budget) to just under $646 million for the
current year [9]. Inflation hasn't been much these past few years,
so this is still essentially a 13% cut.

The state's contribution to the rest of municipal government suffered,
too. At the beginning of the last fiscal year, cities and towns were
told they'd get $173 million in general state aid. During that year,
the state reneged on $18 million of it, and for the current year, they
cut the number from $173 million to $48 million [10]. General revenue
sharing, another local aid program, had already been cut from $64
million in 2007 to zero in 2010. The pressure on municipal budgets
has been intense. Since 2004, average municipal expenses have gone up
20.1% over all the cities and towns in the state. This was a bit
faster than inflation, which has raised prices 15.4% over the same
period. But property tax collections had to go up 28.9% to make up
for the increasingly anemic state support [11]. Worse, the cuts of
the past 12 months have left 39 municipal budgets in disarray, and has
residents facing tax hikes on their car in 27 cities and towns [12].

The state tax cuts of the past few years were only to the benefit of a
few thousand very wealthy people. All the rest of us pay those
increased property taxes. Is that how you want our capital city run?

To be fair, there is some question about how much autonomy the House
Finance committee has had over the past several years. The rumors I
hear say that a lot of this terrible policy was made in the Speaker's
office and then imposed on the Finance committee members, but I have
no personal knowledge of this, and so far as I can know, these
terrible policies have been enthusiastically endorsed by Costantino.

What is the result? The state spent and borrowed so heavily during
the fat times that we are deep in deficit and have no pad with which
to weather the economic storm [13]. The tax revenue lost because of
the recession has taken a bad situation and made it much worse.

Our schools have suffered, our roads, our buildings, and this is just
the beginning. Central Falls can't pay its bills. Other
municipalities, and even the state, have cash flow teetering on the
brink of disaster. Environmental enforcement barely exists, the buses
are raising fares and cutting services, people complain about lines at
the DMV, but they can't afford to get their computer systems working
in time for the opening of their new office. And the galling part is
that all of us, except for a few thousand of the very wealthiest of
our citizens, are paying *higher* overall taxes to support this
wreckage. Is *that* what you want from your government?

During his time on House Finance, you could count on Costantino to say
the right things about controlling costs and preserving services. I'm
charitable enough to be certain he meant it. But the fact remains
that though he may not have been the captain, he was at the wheel of
this ship on a clear day as it barreled onto the rocks -- whatever his
intentions.

Election years often see dramatic conversions of people seeking high office.
So in the face of all this, what was Costantino's signature
accomplishment during the legislative season this spring? Submitting
a balanced budget? Facing down people who benefit from our government
but think taxes are for the little people? Showing us some of those
tough choices we're always hearing about? Nope; it was cutting taxes
on rich people even more [14]. At least you can admire his consistency.

If that's the kind of fiscal leadership you want from your mayor, then
your choice is clear.

[0] For the record, I don't really know him. I've only ever spoken to
him as a witness at House Finance hearings. What follows is an
analysis of the record of the House budget writers. Also, for the
record, I had nothing to do with the whatcheerprov attack on
Costantino. I didn't see anything wrong with it, but it wasn't mine;
anonymity isn't my style.

[1] This is documented in the Rhode Island Policy Reporter issue 24
(March 2007), and in my book, "Ten Things You Don't Know About Rhode
Island", Chapter 1. I know it's not considered the done thing to cite your
own stuff in a footnote, but it's a long story, and besides, I've got
books to sell.

[2] RIte Care, the Medicaid program that provides health care to the
poor, was designed as a way to provide health care at a far lower cost
than emergency rooms. Maintenance on state buildings and roads is
also a way to save money. Cuts in either of these areas will only
save money in the very short term.

[3] This is why tax cuts are always phased in. The "flat" tax, for
example, was phased in so that in its first year, the cost was nearly
inconsequential. It was only in its third and fourth years that it
became a real problem to the budget writers -- because it was passed
without offsetting cuts to spending.

[4] State debt went from about $1.2 billion in 2002 to over $2.5
billion in 2010, counting the supposedly "off-books" GARVEE debt that
paid for the new Providence River Bridge and other transportation
projects.

[7] The Governor's budget appropriated $26 million from RI Housing in
2008. This money was intended to pay for low-income housing. The
number was negotiated down during hearings in House Finance, but the
result was that millions of dollars that had been intended for
low-income housing went to pay for tax cuts instead.
See http://www.pawtuckettimes.com/content/view/15177/1/

[8] For example, we sold the money due us from the tobacco settlement
(twice, but it's a long story), but only some of the proceeds went to
pay down our state's debt. Much of the money, in 2002 and 2007, went
to fill holes in the annual budget (and approximately none of it went
to health-related expenses). This article is informative:
http://www.tobaccofreekids.org/reports/settlements/state.php?StateID=RI

[9] See page 655ff in the House Finance 2011 edition of the budget as
enacted. Over the same period, aid for charter schools has gone up
from $16 million to $38 million in 2011, with an 18% increase in 2011
alone.

[10] ibid, pages 636ff

[11] Data from the municipal budget survey conducted by the Department
of Revenue's Municipal Finance division.

[12] Count from the Municipal Finance division of the Department of
Revenue.

[13] The state budget hole also makes the budget situation of all the
cities and towns worse by absorbing federal aid meant for
municipalities. This happened with Obama's stimulus funds, and even
happened this past week with money intended for our state's schools
being sucked into the state's hole.
http://newsblog.projo.com/2010/08/carcieri-to-use-school-jobs-mo.html

Wed, 18 Aug 2010

Banks have been nationalized, manager bonuses limited and
huge public debts accumulated. Indeed, about the only element of
recent economic thought that remains taboo is blind faith in free
trade. That might be a mistake.

Fri, 06 Aug 2010

It is beyond question at this point that the US Senate will vote to
decrease the number of votes required to pass a cloture motion from 60
to 55 or 50. The only real question is whether it will happen when
Republicans next achieve a majority in the Senate or before.